All Forum Posts by: Christopher Wedde

Investment Info:

Small multi-family (2-4 units) other investment in Rochester.

Purchase price: $165,000
Cash invested: $80,000

Triplex, bought with VA loan, renovated to studs and back on two units for the experience. First time really ever doing construction. Learned a lot and was well worth it! Refied out of the VA loan for 70%, Property appraised for $250,000.

What made you interested in investing in this type of deal?

Needed a place to live and wanted to get into Real Estate investing.

How did you find this deal and how did you negotiate it?

Redfin, placed offer site unseen because I was out of state at the time for work. Did an inspection, and when I got back did another for myself. I knew nothing when I did though. The House Inspector's report was long but found out they should be.

How did you finance this deal?

VA loan

How did you add value to the deal?

I overdid the renovation but I did make it super nice. Plus the market was a good place, a lot of increase from that. It was 3 years for me to renovate 2 of the 3 units by myself.

What was the outcome?

Value increased by $85,000 after spending $80,000 when I should have spent no more than $10,000 but the knowledge is invaluable and would do it again just for that. Gross Rents are $4,325, profit is about $1,250 a month. But more importantly, I learned a lot about houses and myself, I came out a different person.

Lessons learned? Challenges?

Don't renovate two units at once, that was hard. I started the one I was living in March of 2017. Then had an eviction of tenants in Feb of 2018. Started renovating that unit in March of 2018. Finished the first one in Sep 2018. Don't over renovate (unless it is for experience, but it is costly in time and money.) The whole thing was a challenge since I would be doing 16 hour days between work and renovations, then 12-16 on Saturdays and Sundays I would try to take off but would work sometimes.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

None, I will never use them again and I didn't on the second. Also, Nationstar is a terrible servicer, every year I had trouble with my mortgage, they didn't pay taxes, paid taxes on the wrong house, etc.

@Michael Hayworth

@Scott Rogers

I thought the same thing about the dryer, they don't have drains. But come to find out there are condensing (ventless) dryers. I learned something today, which will help me in future rentals...

-Chris

@Jia Lin

So I think you should start looking at getting a lawyer. I can't help with any of the legalities either so I'm sorry.

It does seem that these people have done this before, you should still go ahead with your own mold inspector and have him also look at the new mold spot.

Removing yourself from communication with them and using a lawyer from here on out may be the best option. 19+ emails seems like they are trying to pressure you.

I wish you the best of luck.

-Chris

@Tyler Willson

A economical way is to place insulation in between the units in between the joists, which works very well against sound waves penetrating through. A rubber underlayment will help with heavy footfalls and reduce sound transfer to the subfloor. Also as you place subfloor lay a thick bead of adhesive on each joist, this will reduce sound transfer from subfloor to joist as well as subfloor movement. 

In my experience you won't hear people until they are yelling fairly loud or really loud dogs. Also footsteps are gone unless stompping around. Still might hear creaking from the joists as people put weight on it but its not bad.

Overall peoples voices are easy to filter out, the biggest sounds come from noise transfer through the joists into the drywall.

No matter how much sound damping material you use, people can always over come it anyways. But this will probably will take care of 90% of noises.

@Dean H. Haha, thanks. I do keep the work between 8am and 8pm.

@Anna M. Thanks. I agree and thoughts been my thoughts.

Thank you both for your inputs. My mind has been put as ease.

Hey BP,

Quick question concerning a tri-plex to ease my mind. I currently own a tri plex that has two units rented out and I live in one. I am renovating my unit. My question is, is it appropriate to do a almost full renovation while other units are occupied? I don't intruded in the other units to get work done but one tenant is complaining about it. From my understanding you can renovate units and not have to evict the whole building to do so. I am just looking for the right/best answer. Thanks BP.

V/R

Chris Wedde

I am requesting assistance on this problem of “best course of action”. Sorry for the long post, trying to give enough info. Thanks to everyone who reads it! Please give me any and all thoughts.

Background

I own a Tri-Plex that I currently live in, with Unit 1 & 3 rented. I have been renovating the unit that I live in and it is almost complete. Thinking it will be done in Mar. I have a Tenant in Unit 3 that is late on rent and I am ready to get rid of them. They are on a month to month lease, so I figure that ending the lease will be quicker and hopefully less of a hassle, I am working with a lawyer. They will have 30 days to leave so it will be vacant by the end of Jan. I don’t really expect them to pay rent for the month. I do have the deposit.

Unit 3

Since I am renovating my unit I did have an idea to renovate the other two and create a 4th. However with the possible unexpected “eviction” of unit 3 I am wondering how extensive of a renovation I should do. Unit 3 doesn’t seem bad, need to take a look after “eviction”, will need some fixes here and there. It has plaster walls and one bedroom, bathroom and kitchen have lowered ceiling that I really wanted to raise. The ceiling is currently about 6’6” and it could be about 8’ 7”, if the same as my unit. Other than that I would just need updates and another round of plaster wall repairs. Also I want to add a washer and dryer to the unit. Possibly get an extra $100-$200 for the unit.

Unit 4

I also plan on making a 4th unit as a studio type. The building is set up to support this and I figure going from a tri to a quad won’t be terribly difficult with the town. I will need the 4th unit to be stripped to studs, plumbed and wired appropriately. Since it is just a large bedroom attached to Unit 2 indirectly (via stairwell to 3rd floor) that I am living in. Already added a toilet!

Unit 2

The unit I am renovating/taking showers in. Which will be a three bedroom

Plan

Two plans actually. Also looking forward too other options/opinions and which way is the best way to go. First is to do a quick rehab of Unit 3 and do a full rehab of Unit 4. Second is, should I do a full rehab to both units 3 and 4? I was quoted about 40k to do Unit 4 as a studio. So I am expecting about the same for Unit 3 which is twice as big but won't need as much work. Either way I would need a loan for each renovation ($80k total). I will be negative ($675 ish) with only one unit rented but if I can finish my unit by Mar and get two roommates I can give myself breathing room (+$300 ish). Which will help pay for the extra loans I will have/or use a CC with no interest for X amount of months (which every way I go to get money). I bought the building at 165k and it appraised for 205k (probably less since Unit 2 is not habitable right now) at the time. A bank offered to refinance my VA loan and give me 100% of the appraised value. I figure once I am done renovation it will appraise well and it will help pay off the loans. I expect each unit to take 6 months to renovate so I will be done around Nov of next year with both.

I wrote all the numbers and planned the whole year out with each month’s numbers using the expected time frames. Did not include debt service on the loans I don’t have yet though. My current job also will allow a minimum of $1400 in breathing room after all my living expenses are paid. If any more information is required let me know, I can also send my written plan to anyone who wants it. Thanks again!

@Erik E. 

Alot of the duplexs I see out here also say stuff like that but the rent just covers the mortgage usually. It won't cover any other expenses. Run the numbers yourself.

Whether to place the property in your name or a business name will be up to you. The type of loan you will get will also matter. First time home buyer FHA/VA loan is the way I went and I (obviously) recommend. This definitely will mean that your property will be in your name. Remember to run the numbers as if you don't live there. That way when you move you know about how much CF it will have.

Best practices, this is something that might change depending on your experiences. So first thing is to inform your tenants whether inherited or new your expectations. I told mine something along the lines of "This is a business, and you are the customer. And I am here to provide a nice place to live at a fair price. And if any issues arise please contact me to get it resolved." I would also set up systems where your tenant can pay you, don't go door knocking for rent. Checks thru mail, Cash thru banks. I would prefer electronic payments, but I don't have tenants who know how to use the internet very well. When I do I am thinking of using programs like Cozy, or similar. Fix problems as they arise. There are more but when you start you will learn the way you like to run things. I am still learning.

I would keep your rent money in a separate account and use the card to that account for easier tracking of maintenance costs. I think its up to you whether or not you have your rent pay your mortgage directly. I personally have my W2 paycheck pay for as much as possible (I am renovating my unit, so my W2 can't pay for everything all the time). I am trying to place 3 months of operating costs into a savings account and 3 months into a higher interest money market account. I am still trying to figure out the best practice here, but this is my current focus.

If you are going to get an FHA/VA loan with the one year living requirement I would say go for the quadplex. It might have a few more moving parts because the extra tenants, once it is settled out it can run quite smoothly. I have spent only a couple hours a month on tenants on average, with most of it being in the first 3 months.

I also am planning on starting my first LLC in January. I have no rush there.

I hope I answered your questions to the furthest extent as possible. If not , or if I was confusing let me know. I am also new and still learning. Gain as much knowledge as you can, but don't let the fear of not knowing everything stop you. I feel people learn the most by doing. Plus if you have experience in something it is easier to tie someone's comments to it, which makes learning easier. I still wouldn't know the difference between a ball valve and a globe valve if I never needed to, but it made renovating my house that much easier.